India makes a big leap in ‘Ease of doing Business’ index, ranks 77

The country recorded a rise of 30 places in the rankings last year, clinching the 100th spot.

India jumped to the 77th spot in the ranking of countries by ‘ease of doing business’ on Wednesday, improving by 23 places over its 2017 standing on the back of reforms that made it easier to get construction permits, pay taxes and access electricity, according to the World Bank. The World Bank Group’s Doing Business 2019 report said India carried out six business reforms during the past year that earned it the credential of being a top global improver for the second year in a row. The country recorded a rise of 30 places in the rankings last year, clinching the 100th spot.

“The target of 50 is no longer out of reach… Ultimately, the ease of doing business is maximising the governance with minimal government personnel and procedures so that the environment itself is eased,” finance minister Arun Jaitley said at a news conference after the report was released, referring to the target set by Prime Minister Narendra Modi after he came to power in 2014. Jaitley added that India moved from the 142nd place in the index to the 77th spot in the Modi regime.

The Prime Minister said his government was committed to economic reforms to ensure an environment that fosters investments. “Delighted at yet another rise in India’s ‘Ease of Doing Business’ rank. We are unwavering in our commitment towards economic reforms, which will ensure an environment that fosters industry, investment and opportunities,” Modi tweeted.

The country improved on six of the 10 metrics tracked by the World Bank, including ‘obtaining credit’ and ‘construction permits’. India and neighbouring China are among the top 10 improvers this year. China has moved up from its previous rank of 78 to 46th place. Pakistan is ranked 136 in the index that surveys 190 countries. On the measure of absolute progress towards best practice, India improved its doing business score to 67.23, from last year’s 60.76.

Commerce and industry minister Suresh Prabhu said the rise was because of a combination of factors.

“[It is because of] administrative changes, legislative reforms and particularly what our finance minister did – very path-breaking reforms, whether it is insolvency code, whether it is GST and many others, as well as technological changes,” he said.

The report said that during the past year, India made starting a business easier by fully integrating multiple application forms into a general incorporation form.

The country also launched the Goods and Services Tax (GST), a reform that replaced more than a dozen levies by the Centre and states. “India made paying taxes easier by merging diverse sales taxes into a single GST. This is another area in which reforms have been carried out for a third consecutive year,” the World Bank said. Jaitley, however, said the full impact of GST was not seen in the latest report.

“The contribution of GST was not entirely felt this year. They have taken the months up to December 31 into account. We had some teething trouble [in the early days of GST]. Next year, it is likely to improve,” the finance minister said. He said the online process of filing returns for direct and indirect taxes, improved payment procedures and the reduction of number of interfaces resulted in the improvement of India’s rank from 156 to 121 on the ‘paying taxes’ indicator since 2014. This year, India performed well in the area of ‘getting credit’. The report said the country strengthened access to credit by amending its insolvency law to give secured creditors priority over other claims in insolvency proceedings.

India’s global rank in ‘getting credit’ has improved to 22 this year. India also performed well in the area of ‘protecting minority investors’, with a global rank of 7, and scoring a perfect 10 in the index measuring shareholders’ rights and role in major corporate decisions. The average import into the country spent less than 100 hours being checked for compliance at the border, the World Bank said, down from more than 250 hours a year previously. “India’s strong reform agenda to improve the business climate for small and medium enterprises is bearing fruit. It is also reflected in the government’s strong commitment to broaden the business reforms agenda at the state and now even at the district level,” said Junaid Ahmad, World Bank Country Director in India. Department of Industrial Policy and Promotion secretary Ramesh Abhishek said the government was incentivising those who were doing honest business. “The 53 rank [jump] in two years is the highest jump by any country in the last seven years,” said the DIPP secretary.

“In 2014, we were sixth out of the south Asian countries, today we are first,” he added. With streamlining of processes, the country has made it faster and less expensive to obtain a construction permit. “India’s continued effort to make Dealing with Construction Permits easier has this year catapulted the country to a global rank of 52, from 181 last year,” according to the World Bank.

The country, however, continues to lag in areas such as ‘enforcing contracts’ (rank 163) and ‘registering property’ (rank 166). Jaitley said ‘registering property’, which was in a “very bad state”, was an area of the states and needed a uniform pattern to be followed.

“Our targets of improvement are ‘registering property’, ‘starting a business’, ‘insolvency and taxation’ and ‘enforcement of contracts’. There are already legislative systems for insolvency, taxation and enforcement of contracts. Now those will get implemented and they [World Bank] will determine them for the index,” the finance minister.

Getting electricity was made cheaper and faster in Delhi with the cost for low voltage connections reduced by more than 30% of the income per capita, while the time needed was reduced to 31 days, from 39 days. In this category, India jumped from the 137th spot in 2014 to 24 in 2018. Industry bodies and experts said India’s jump in the rankings was an outcome of reforms.

“The revised position will greatly add to the investment attractiveness and competitiveness of the Indian economy,” CII president Rakesh Bharti Mittal told PTI. Former economic affairs secretary Shaktikanta Das said: “This will enhance competitiveness of Indian economy and generate higher investments, domestic and foreign.”

Congress spokesperson Jaiveer Shergill said: “Mr Jaitley cannot hide reality by misleading the nation. The truth is only “Ease of looting India” has increased under the BJP rule.”